1. Accountability
What is missing in the Code is provision relating to accountability. e.g. when
a refund due to the assessee is not granted within the time specified under
the Act, the assessee may have to file an appeal and pursue the remedy. No
questions will be asked to the Officer why no refund is granted. Similarly,
the Officer may make huge addition knowing well that the said additions will
be deleted by the appellate authorities, still no question will be asked to
the Officer in to why he has made such an addition. We therefore is of the
opinion that the accountability provision should have been introduced as
recommended by Dr Raja Chelliah in his committee report. (1992) 197 ITR 257
(ST).
2. Tax Services
The approach of the tax officials must be changed from ‘tax collection’ to
‘tax service’, which aspect is conspicuously missing in the Code. The
Government should have stated in the preamble that as they are relying on
voluntary compliance of the assessee based on a certificate of Chartered
Accountant. The attitude of the tax officials must be changed from ‘tax
collection’ to ‘tax services’.
3. Appeal
All orders of the Assessing officer should be made appealable to CIT(A) and
all orders of commissioner/Chief Commissioner must be made appealable to
Tribunal. Similarly all orders passed with approval of Commissioner (rather
than only of the Chief Commissioner as proposed) must be made appealable to
Tribunal. Considerable litigation has taken place to decide whether a
particular order is appealable or not.
4. Appeal to High Court
Section 260A of the Income tax Act 1961, provides an appeal to High court,
where as the new Code does not make any such provision to file an appeal to
High Court. Clause 192 of the Code provides an appeal to National Tax
Tribunal. The constitutional validity of National Tax Tribunal is still
pending before the Apex Court, and as the pendency has been reduced
considerably before various High courts and Tribunal, whether the country
really needs a National tax Tribunal is itself debatable. Hence, it would be
appropriate if a provision is made for filing an appeal to High Court.
5. Power of Revision
Clause 194 gives very wide power to the Commissioner to revise the order
passed by the Assessing officer. At present, the assessee can file an appeal
to the Tribunal against the order of Commissioner. However, no provision is
made to file an appeal to the Tribunal against an order of revision by the
Commissioner under Clause 194. The assessee has no option but to file a writ
against the order of Commissioner and this will increase the litigation. It
would be very appropriate to provide for provision for an appeal to the
Tribunal against such an order.
Section 264 of the Income Tax provides that an assessee can approach to the
Commissioner for revision of order passed by subordinate authorities under
certain circumstances. However, the Direct tax Code does not provide for any
such provision for approaching to the Commissioner. It is very essential to
have provision similar to section 264 in the code to render justice to the
assessee.
6. Rectification of Mistake apparent on record
At present under section 154, only mistake apparent from the record can be
rectified. Clause 167 of the Code proposes to give very wide powers to the tax
authorities to rectify their orders within 2 years for the following deemed
mistakes.
(a) if there is a decision of jurisdictional High Court or Supreme court after
the date of the order.
(b) if there is any amendment in the Code after the date of order,
(c) if there is any finding or direction in the case of the assessee or in any
other case for any financial year by any authority or Court in proceedings
under the Code or under any other Law.
With such unlimited powers, there will not be any finality for any assessment.
7. Reassessment.
Under clause 166 very wide powers are proposed to be given to the AO to reopen
the assessment within 7 years. At present the AO cannot reopen the assessment
if all particulars have been disclosed at the time of the assessment or on
change of opinion. This concept is now proposed to be given up. The powers
given to the AO, under the Code include power to reopen under following
circumstances also –
(a) if there is a decision prejudicial to the assessee by ITAT, National Tax
Tribunal, High Court or Supreme Court in the case of the assessee or any other
person either under the income tax Act, or under the Code or under any other
law.
(b) If original assessment is not in accordance with any other direction,
instruction or circular issued by CBDT.
(c) if there is any audit objection by Comptroller and Auditor General of
India.
With these unlimited powers, the assessment will not be finalised for number
of years and it may lead to harassment of the honest assesses and may lead to
unethical practice .
8. Anti Avoidance rule.
Under Clause 112- General Anti Avoidance Rule, the CIT can treat any
transaction entered into by the assessee as impermissible avoidance
arrangement and tax can be charged if the CIT is of the opinion that the
assessee has avoided any tax by entering into such a transaction. This will
lead to unending litigation.
9. New concept of taxation of Income
Due to judgements of Apex Court and various amendments, the law was being
settled in respect of various issues. However, the new concept of taxation of
income will lead to lot of litigations. Therefore, it would be appropriate to
maintain the basic structures of Income Tax Act 1961 and make amendments which
are very essential. The renumbering of various sections will lead to more
complexity rather making the law simple. It may be noted that the Direct taxes
Code has 285 clauses and 18 Schedules. In the clause 284 definitions, there
are 318 definitions, as against 85 in the Income Tax Act 1961. Present Income
tax Act contains 14 schedules in the Direct Taxes code four new schedules have
been added and more than 65 sections are transferred to schedule either fully
or partly. Whether we can achieve the desired object of simplification of the
Direct taxes by shifting the provisions from main sections to definition
clause and schedule is a thought for debate and consideration ?
10. Professionals must be involved in the
drafting proposed New Direct Tax code.
It is very unfortunate that, the Government has not involved the professionals
who are well conversant with tax law for drafting the Tax Code. We are of the
opinion that the Government should involve the professionals whose integrity
is beyond doubt, in the process of drafting the Bill. It is also necessary to
interact with the Departmental Representatives, Members of Income Tax
Appellate Tribunal, and the Judges who deal with tax matters. Their view must
be considered while redrafting the New Direct Tax code to our country.
11. Considering the unlimited powers proposed to be given to the tax
authorities and without any accountability provision, we are of the opinion
that the proposed code will not achieve the desired object.
12. These are the conceptual suggestions to the proposed code. We will
be discussing each and every provision in depth and will be forwarding the
suggestions objectively to the consideration of Hon’ble Finance Minister.
Readers may send their view to the Federation for better representation.